Friday, May 17, 2013

The World View of the President of the Council on Foreign Relations

Yesterday, in San Francisco, I attended a World Affairs Council private reception for Richard Haass, President, Council on Foreign Relations.

Haass is out with a new book, Foreign Policy Begins at Home: The Case for Putting America's House in Order. Don't get too excited about the title of the book. It's not as though he thinks the US should mind its own business and stay out of the affairs of other countries. At the reception, Haass discussed his views and, although he wants to see a strong domestic economy, his idea of a "foreign policy that begins at home" doesn't mean he is against United States interventions globally. Though he does want to see a shift in regional focus.

During the reception he said that the United States should stop its fixation with the "Greater Middle East." He said there are no great powers in the Middle East, thus less focus needs to be given to the region. He said the focus needs to be "dialed down." On the other hand, he said the US should "dial up" involvement in Asia, with more of a military presence in the area and more diplomatic dialogue.

He said that the US can influence the area in a way favorable to its interests. He said, get this, "I don't want to leave Asia to the Asians." He compared Asia to early 20th century Europe, when Europe was the epicenter of world wars. He suggested the same could now occur in Asia. He implied that China was unstable and stated that more than 100,000 major protests are occurring in China each year.

He said Pakistan deeply troubled him, that the country has enormous problems. He contrasted the concern over Iran, which is just trying to build a nuclear bomb, and North Korea, which has 11 nuclear bombs, as minor compared to Pakistan, which has hundreds of nuclear weapons, some completed and others that soon will be completed.

He said that France was headed for a severe financial crisis that it was "a case of when, not if." He said, he believes that Germany will help France---which I took to mean he believes that Germany will give thumbs up to ECB money printing to bailout France.

I almost choked on this one but he said eurozone leaders were not proactive during the financial crisis and that the US was fortunate to have Hank Paulson, Tim Geithner and Ben Bernanke come to the rescue. (For a total refutation of Paulson, Geithner and Bernanke as heroes read the first 52 pages of David Stockman's new and important book, The Great Deformation: The Corruption of Capitalism in America.)

Haass also said it was time for a "next generation" NAFTA agreement. (That is, new crony deals to be banged out)

Domestically, he said, America needs to rebuild economic growth. He specifically called for greater domestic focus on infrastructure.On the education front, he noted that foreigners were lined up to get into Harvard, Stanford and Princeton, but that he hasn't seen any line of foreigners trying to get into the public schools in New York City or Washington D.C. It did not appear that he understood, and got the importance of the fact, that Harvard, Stanford and Princeton are private schools and that public schools are government run, and that this might be an important difference. He left the impression that if you throw more money or "better" planning at the public school sector that somehow all the warnings that Ludwig von Mises gave us about government bureaucracy wouldn't matter.

Haass said there is nothing obvious that the US can do about the Syrian situation. He said that if Assad is taken out, the problem becomes one of a replacement and that given the various factions, a long civil war would be likely. He said he is against sending troops to Syria, but seemingly in contradiction to the complex problems he saw if Assad is overthrown, he said he was in favor of arming opposition to Assad.

Back to the domestic front, he raised concerns that I have heard from other senior level CFR officials, namely a concern about the entitlement programs in the US and the impossible trajectory of entitlement payments. He mentioned the big three: Social Security, Medicare and Medicaid. He said the crisis stage is about 7 to 12 years away. Again, numbers I have heard from other senior CFR officials.

Bottom line: Haass is a typical power insider that wants to micro-manage the world, or at least parts of it. He seemingly wants to ditch the heavy intervention in the Middle East, but wants to "dial up" the intervention in Asia. Good luck with that. Domestically, he has all kinds of plans for government to fix problems, from infrastructure to education, not once considering free market alternatives.

But what marks him as a true insider is that he knows the gig is almost up. From what I can discern, the real insiders know this. These guys know there is not much time and that they don't have a solution. One even asked me a few months back, "Bob, what would the Austrians do?" The answer is one that is tough for them to swallow, it is get out of the way, close most, if not all government operations, and put things back in the hands of the free market, or, alternatively, as Ron Paul puts it, a crisis will develop on its own and wipe out the bad institutions, like the Fed. Haass gives it 7 to 12 years, I wonder if we have that long.

"These guys know there is not much time and that they don't have a solution."

This is why I believe they will do what they must to ensure the people's continuing faith in the system - even if this means a true default on some of the sovereign debt and a decentralization of Europe, as two examples.

Faith in the system of regulatory democracy is the most important tool for the elite, one that must be defended. The people must continue to believe that they have a voice, and that the benefits of subservience outweigh the costs.